The new COVID Prague program focused on business activities in the Capital City of Prague followed the fate of its predecessors COVID I and COVID II. This means that the available funds were exhausted on the same day as the receipt of applications, which thus ends. The COVID I and COVID II programs are also exhausted. Entrepreneurs thus have no choice but to wait for the announcement of the conditions of the COVID III program. What should be its parameters?
The Ministry of Industry and Trade (“MIT”) in cooperation with the Czech-Moravian Guarantee and Development Bank, a.s. (“ČMZRB”) and other entities prepared several programs aimed at supporting entrepreneurs whose business activities were limited due to the occurrence of coronavirus infection and related preventive measures. The COVID I program was essentiallya loan program (through which an interest-free loan for operating financing was provided), while the COVID II and COVID Prague programs were guarantee programs (through which a bank guarantee was provided for an operating loan with commercial banks and a financial contribution to pay interest on the guaranteed operating loan). In addition to their scheme and conditions, the programs also differed in terms of the targeted entities. Only small and medium-sized enterprises ("SMEs") could apply for COVID I. Self-employed persons (“self-employed”) were explicitly included in the COVID II program, as these may by definition also fulfill the criteria of SME, but at the same time entrepreneurs with economic activities in Prague have been excluded. Therefore, the COVID Prague program was prepared for them in cooperation with the Capital City of Prague. None of these programs are aimed at large companies, which do not meet the definition of an SME. The COVID Plus program, was prepared to meet these targets in cooperation with the Export Guarantee and Insurance Company (EGAP).
A total of 3,200 applications were accepted for COVID I, the vast majority of which have already been rejected. The number of applications approved so far is around 200 projects for which a loan in the total amount of CZK 900 million has been pre-approved. Due to the fact that the capacity of the program is CZK 1 billion, the remaining part will be used up for the rest of the already submitted applications. The COVID I program is therefore already closed and no other applications will be accepted.
A total of 5,900 applications were received for the COVID II program for the full capacity of the program, which amounts to CZK 20 billion. So far, 400 applications amounting to approximately CZK 2.5 billion have been processed. In contrast to the COVID I program, most applications are approved, which is attributed to the fact that commercial banks were involved in the program, which performed a so-called credit risk assessment (i.e. the applicant's ability to repay the loan), which became a stumbling block for most COVID applicants.
In just 9 minutes, the number of applications exceeding the full capacity of the program was accepted into the COVID Prague program, to which a total of 600 million crowns from the Prague operational program Prague - Pole of Growth was allocated. Although the experience of the COVID I and COVID II programs was expected to be of great interest to applicants, the reality ultimately exceeded expectations. The rate of program exhaustion surprised everyone, also because the application could only be submitted by entrepreneurs with a loan already approved in a commercial bank, and not just promised, as in the case of COVID II.
Entrepreneurs now have no choice but to wait for the announcement of the terms of the COVID III program, whose parameters are not yet known. However, the information provided so far shows that it will be a guarantee program (i.e. similar to COVID II and COVID Prague, and not a credit program as with COVID I), but with a completely different scheme.
First of all, from a legal point of view, it should no longer be a guarantee provided in the support regime according to the EU de minimis Regulation (for which there is a problem especially for entities that have already exhausted de minimis support in the last 3 years). In accordance with the Temporary Framework for State Aid Measures to Support the Economy in the Current Spread of COVID-19 Coronavirus the European Commission has approved an aid scheme for SMEs of up to CZK 1 billion.
Related to this is the second fundamental change. Entrepreneurs would no longer apply for a guarantee with CMZRB, but would only negotiate with a commercial bank involved in the program, which would eliminate a number of administrative legal difficulties. Komerční banka would provide the applicant with full risk management and assess the fulfillment of the COVID III program conditions and also provide a loan that would be guaranteed by ČMZRB in the form of a cumulative guarantee provided to individual banks. However, it is necessary to wait for the specific conditions of the program to be outlined. The unveiling of such conditions is expected in a matter of days.